Branson injects $11 million to pay Virgin Orbit’s laid-off staff

Sir Richard Branson is injecting $10.9 million into Virgin Orbit as the troubled rocket company laid off 85 percent of its workforce after failing to secure cash from new investors.

CEO Dan Hart told employees earlier Thursday that the company would suspend operations indefinitely.

Branson’s investment arm, Virgin Investments, has injected enough cash to pay most of the severance payments for roughly 675 of its employees, a person close to the deal said, leaving just 100 employees to keep the company afloat while CEO Dan Hart makes a last-ditch effort to close the deal.

The company has been in talks with at least one financial investor in recent days.

According to a filing with the U.S. Securities and Exchange Commission, Virgin Orbit estimates it will pay about $15 million in costs related to the layoffs.

Branson injection a senior secured convertible bondwhich gives Virgin Investments a “priority security interest in substantially all [the company’s] eligible assets, including all aircraft, aircraft engines (including aircraft spare parts) and related assets, other than certain normally excluded assets” should Virgin Orbit be forced to file for Chapter 11 bankruptcy. That now seems increasingly likely after Hart’s announcement.

Virgin Orbit, which spun out of Branson’s Virgin Galactic in 2017, announced in mid-March that it would lay off employees for a week while it seeks emergency funding.

The group has had no money since last spring. In 2021, it was put on the market through a special purpose acquisition company, with a value of nearly 4 billion dollars. However, against the expectations of 300-400 million dollars, it collected only 220 million dollars. Then a failed launch from Britain set back plans to take the mobile launch system global, further hurting the company’s finances.

Virgin Orbit hoped the UK launch would open up the international market for its unique system. The company has developed the world’s only operational horizontal launch capability, flying a rocket under the wing of a converted Boeing 747 jumbo jet to an altitude of 35,000 feet. The rocket is then released to launch the satellites into space.

Insiders at Virgin Orbit told the Financial Times that the company was burning through about $50 million a quarter. Branson has invested more than $1 billion in Virgin Orbit since its founding, including $60 million since November.

Virgin Orbit in November reported a net loss of $43.6 million in the third quarter of last year, compared with a loss of $38.6 million in the same period in 2021. Free cash outflow also increased from $39.5 million to $52.5 million. However, the company last year entered into a “strategic agreement” with Spire Global for multiple rollouts starting in 2023. The company also reported a binding contract backlog of $143.1 million.